Question
The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $160,000 and the asset will provide the following
The Summit Petroleum Corporation will purchase an asset that qualifies for three-year MACRS depreciation. The cost is $160,000 and the asset will provide the following stream of earnings before depreciation and taxes for the next four years: Use Table 12-12.
Year 1 | $ 70,000 |
---|---|
Year 2 | 85,000 |
Year 3 | 42,000 |
Year 4 | 40,000 |
The firm is in a 35 percent tax bracket and has a cost of capital of 8 percent. Use Appendix B for an approximate answer but calculate your final answer using the formula and financial calculator methods.
Calculate the net present value.
Note: Negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places.
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